The U.S. government is investigating whether private military
contractor Blackwater USA, blamed for the deaths of 11 Iraqis in
Baghdad on Sunday, has been shipping unlicensed automatic weapons and
military goods to Iraq.

Two former Blackwater employees have pleaded guilty in Greenville to
weapons charges and are cooperating with federal officials
investigating Blackwater, based in the tiny town of Moyock in North
Carolina's northeastern corner.

Blackwater, which guards the U.S. ambassador and other State
Department personnel in Iraq, had its license to operate in Iraq
suspended this week after Sunday's shooting at a busy Baghdad
intersection. Prime Minister Nouri al-Maliki has said he favors
barring the company permanently, calling the shooting
"cold-blooded."

The case has been forwarded to a magistrate to determine whether
criminal charges should be filed, an Interior Ministry spokesman said
Friday.

Blackwater has said that the contractors were fired upon and were
returning fire.

The State Department relies on Blackwater to protect its employees.
The company deploys about 1,000 contractors as bodyguards for the U.S.
ambassador and other diplomats in Iraq.

Blackwater declined a request for an interview Friday.

The investigation into Blackwater's weapons is noteworthy because
Congress and the Iraqi government have criticized the company and
accused it of acting with impunity. One of its contractors, for
example, shot and killed an Iraqi vice president's security guard on
Christmas Eve in Baghdad. Blackwater sent the man back to the United
States and fired him. He has not been charged in the U.S. or Iraq.

Two sources familiar with the investigation said that prosecutors are
looking at whether Blackwater lacked permits for dozens of automatic
weapons used at its training grounds in Moyock. The investigation is
also looking into whether Blackwater was shipping weapons,
night-vision scopes, armor, gun kits and other military goods to Iraq
without the required permits.

U.S. law demands close attention to who ships weapons -- and to whom
they are shipped. The weapons-smuggling investigation was mentioned in
a letter sent Tuesday to State Department Inspector General Howard
Krongard by Rep. Henry Waxman, a California Democrat who for years has
been investigating wrongdoing by private contractors in Iraq.

Waxman charged that Krongard, the State Department's top watchdog, was
impeding the investigation "into whether a large private security
contractor working for the State Department was illegally smuggling
weapons into Iraq."

When Krongard heard about the investigation, he sent an e-mail message
ordering his investigative staff to stop work until the federal
prosecutors in North Carolina could brief him. Krongard delayed the
briefing for weeks, Waxman said.

Krongard did not assign an investigator to the case, but rather a
member of his congressional and media staff, Waxman wrote.

Krongard disputed the charges in a statement.

"I made one of my best investigators available to help Assistant
U.S. Attorneys in North Carolina in their investigation into alleged
smuggling of weapons into Iraq by a contractor," he said.
Blackwater is the only State Department security contractor based in
North Carolina.

The prosecutors, James Candelmo of Raleigh and John Barrett of
Greenville, did not return phone calls for comment.

In January, the prosecutors obtained guilty pleas from two former
Blackwater employees, Kenneth Wayne Cashwell of Virginia Beach and
William Ellsworth "Max" Grumiaux of Clemmons, in Forsyth
County. The men and their lawyers either refused to comment or did not
return calls.

The court files are stingy on details of the crimes: The men each
pleaded guilty to possessing stolen firearms shipped in interstate or
foreign commerce. Barrett, the prosecutor, has twice delayed the men's
sentencing because of the help they are providing in the ongoing
investigation.

While the federal investigation of Blackwater is proceeding behind
closed doors, the House Oversight and Government Reform Committee, led
by Waxman, has been pressing its investigation of Blackwater and other
private contractors. Blackwater first came to the public's attention
in March 2004, when a mob dragged the bodies of four slain Blackwater
contractors through the streets of Fallujah, Iraq.

The men had gone into Fallujah without maps or armor and with fewer
men than their contract called for, according to contracts and reports
obtained by The News & Observer. Blackwater was working as the
bottom layer of a series of subcontractors that ultimately reported to
contracting giant Halliburton.

In December, the U.S. Army ordered Halliburton to refund the Army $20
million because it had no permission to use Blackwater for its
missions.

The House Oversight
Committee has requested that Erik Prince, the founder of Blackwater,
testify at a hearing on Oct. 2.

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